City gives the nonprofit five times what is reported to IRS

Watchdog Minute: Union funds not reported

Millions of dollars a year in city payroll deductions routed to the San Diego firefighters’ union are not reported by the nonprofit organization, limiting information available to the public and rank-and-file members about organization finances.

The International Association of Fire Fighters Local 145 reported revenue of $1.9 million on its most recent federal tax filing. City payroll data obtained by U-T Watchdog show the group received $9.5 million in withholdings during the same period.

The union president, Frank De Clercq, declined multiple interview requests over the past month. The withholdings include much more than dues for 850 members, he wrote in an email.

Most of the funds are forwarded to a Tierrasanta credit union to cover members’ house or car payments or deposited into savings accounts or given to firefighter clubs and organizations, he said.

“These are simply a courtesy pass through for our membership, not income for the Local 145,” De Clercq said by email.

The city’s Municipal Employees Association, which represents white collar workers, has similar practices, although on a smaller scale. The group reported $537,000 less in revenue to the IRS on its most recent annual tax filing than the $3.1 million in withholdings paid to the union by the city.

General Manager Michael Zucchet said many of the deductions routed through the union are not union income.

“There’s no discrepancy,” he said. “The city withholdings include health, dental, vision and other benefits purchased through MEA plans. It’s not all income to the union.”

Accounting practices can be discretionary so it is unclear how significant the omission of the pass-through funds might be. Steven W. Northcote, the San Diego accountant who prepared the firefighter union’s most recent tax filing, said his fiduciary duty prohibited him from discussing client work.

Experts said the funds passing through should be disclosed in the interest of promoting transparency and confidence in the union.

“Sunshine is the best antiseptic,” said F. Vincent Vernuccio, a labor and policy expert at the Mackinac Center, a free-market think tank in Michigan. “The taxpayers and firefighters of San Diego deserve to know where and how the union is spending their money.”

Regina Birdsell, president of the Center for Nonprofit Management in Los Angeles, noted that nonprofit organizations must disclose their finances in exchange for the tax-exempt status afforded them by the government.

“We suggest board members take seriously their responsibility to make sure that everything is transparent,” she said. “The idea is, how did the money come in, where did it go and what did it accomplish?”

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Ed Daley is CEO of the San Diego Firefighters Federal Credit Union, the Tierrasanta lender that processes millions of dollars in transactions for Local 145 members every year.

Daley said the credit union and labor union are separate entities, but he understands why the labor union is not recording the withholdings as revenue on its tax filings.

“The bulk of that money comes to us through the union so it’s not union income,” he said. “The union gets nothing from that account. That’s why you wouldn’t include it. It’s pass-through.”

Most large nonprofit groups perform audits and make them available to the public in the interest of openness. De Clercq declined to release his union’s audits, noting that revenue is less than a $2 million threshold requiring disclosure under state law.

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On its tax filing, the union checked “no” on the box that asks if the organization conducted an independent audit or financial review. The tax return also states the union has no written conflict-of-interest policy, no written whistle-blower policy and no independent review of executive compensation.

Local 145 reported membership dues of $1.6 million during the year ending June 30, 2012, the most recent tax year reported. Total revenue, listed at $1.86 million, included $27,917 in unspecified service fees.

U-T Watchdog requested withholding data from the city for all six bargaining units that represent San Diego workers.

In addition to the firefighters’ group and the MEA, those include the Deputy City Attorneys Association, Police Officers Association, Teamsters Local 911 and the American Federation of State, County and Municipal Employees Local 127.

None of the others reported less revenue to the IRS than the payroll withholdings they received from the city.